The Nasdaq finished up +18 while the DOW was down -64. We've seen this picture before. Oh yea, at previous highs.

Keene Little : 2/2/2009 4:06:37 PM

Assuming we continue a little higher tomorrow, the SPX 120-min chart shows the little bounce (to 845) to then be followed by another strong decline, one that firmly breaks the January 21st low as it heads down to the November low at a minimum (at least that's the setup). It's why I hope we get the nice short play setup tomorrow. Link

We're still on track for another rally leg into tomorrow. Looking at the updated SPX 15-min chart from this morning I continue to like the potential for a rally up to about 845 to finish a 3-wave correction of the decline from last week: Link

Assuming the 2nd leg up will now continue into the close the first potential resistance level will be 834 which is where the larger bounce will have two equal legs up from this morning's low. But when the pullback is deep like this afternoon's (especially for the DOW) it's common to see the 2nd leg achieve 162% of the 1st leg and that's the Fib projection shown at 844.77 which is very close to the 50% retracement at 845.36. Nice correlation there.

The 2nd leg up should be an impulsive (5-wave) move so if we're getting a clean 5th wave that is nearing the 845 level tomorrow I'll be all over it for the next short entry. That's the plan and now we watch to see if it unfolds that way for us.

Jeff Bailey : 2/2/2009 3:10:05 PM

CNBC ... reporting that refiners may have averted worker strike.

See gasoline declines today.

Jeff Bailey : 2/2/2009 3:04:22 PM

NASDAQ a/d 1,236/1,509

Jeff Bailey : 2/2/2009 3:04:10 PM

NYSE a/d 958/1,958

Jeff Bailey : 2/2/2009 3:03:17 PM

BKX.X 27.71 -3.51% ... challenge morning lows.

Keene Little : 2/2/2009 2:59:24 PM

SPX has been "walking" down its broken downtrend line from last week but not looking (yet) like it's going to break much lower. Last-hour rally?

Jeff Bailey : 2/2/2009 2:58:42 PM

WMT's WKLY S1 (RSD) at $46.10.

If trading ES/SPX/SPY, might want to add this one along with GE to closely watched list.

Jeff Bailey : 2/2/2009 2:57:15 PM

At this morning's open, WMT was #9 most heavily weighted ES/SPX/SPY component.

Jeff Bailey : 2/2/2009 2:56:37 PM

AMGN $5.28 +0.78% ...

WMT $46.40 -1.54% ...

Jeff Bailey : 2/2/2009 2:52:44 PM

LQD could become very important ...

Has selling in the shorter-dated part of the Treasury market come from poor RISK/REWARD profile, and cash rotating out to longer-dated Treasury maturity in seek of yield?

Or to higher grade corporate as depicted by LQD?

Jeff Bailey : 2/2/2009 2:50:34 PM

LQD's WKLY Pivot (RSD) right here at $99.40.

Jeff Bailey : 2/2/2009 2:49:54 PM

LQD $99.42 +0.09% ...

Jeff Bailey : 2/2/2009 2:46:49 PM

dj- S&P: Highly rated borrowers finding bond buyers, lower cost

The credit markets are easing for high-quality borrowers, particularly corporate issuers rated AA or A, according to Standard & Poor's. Issuance of investment-grade bonds increased in December to 2007 levels, while the $101.88 billion in issuance in January was close behind December's levels, the rating agency said. "Investors are now much more receptive to buying these issues," S&P noted, pointing to a decrease of 1 percentage point in the rating agency's investment-grade composite spread from its five-year high on Dec. 17 to 4.78% as of Friday. The new issues often have significantly lower yields than bonds issued by the same companies during the credit-market boom several years ago, as yields on competing Treasuries are near record lows. Lower yields mean reduced borrowing costs for the issuer. For example, Amgen Inc. (AMGN) issued 10-year maturity bonds with yields of 6.17% in May and 5.7% last month. Wal-Mart Stores Inc. (WMT), which is rated AA, tapped the market in March 2007 at a 5.08% yield, then with a similar-sized issue last month with a coupon rate of only 3%. The opposite has been true for companies with ratings slightly above or below investment grade. Printing giant R.R. Donnelley & Sons Co. (RRD), rated BBB+, or three notches above junk status, issued 10-year notes at a 6.23% rate in January 2007. Poor prospects and the company's recent weak earnings guidance pushed the yield on bonds it issued last month to 11.25%. S&P noted the high-yield market was "all but dead" in the fourth quarter, but some stronger speculative-grade-rated companies have issued bonds that drew strong interest from investors. However, coupons were high, from 8% to 10.5%, and all of the recent issues were sold at a discount, pushing yields up to 9% to 13%.

Jane Fox : 2/2/2009 2:44:18 PM

A quick look at the internals tells me the bears have ball today. Link

Jeff Bailey : 2/2/2009 2:43:15 PM

Good question though! I would think a trader that uses all session pivots would want to keep apples with apples and apply trend from all sessions too.

I would then think that you would have to know what Fair Value for the SPX was on the inflection high and low trade dates for any ES "skew" if those inflections came from an all session trade. Try and make an artifical trend for your SPX and SPY chart.

Jane Fox : 2/2/2009 2:40:05 PM

I finally have my charts back. I see AD line is -1092 and from all the negativity I was reading on various websites I thought it would be a lot worse than this.

After breaking its downtrend line from last Wednesday SPX came back down and tagged it at 818. Between that and the projection for two equal legs down (816.56) is the reason I'm thinking the pullback will hold. But much lower and it would instead be a bearish sell signal that support isn't going to hold.

Jeff Bailey : 2/2/2009 2:08:43 PM

RS= Regular Session

Jane Fox : 2/2/2009 2:08:38 PM

Macy's to cut 7,000 jobs, or 4% of workforce

Jeff Bailey : 2/2/2009 2:08:29 PM

YM 7,827 ... new RS low.

Jane Fox : 2/2/2009 2:08:21 PM

NEW YORK (MarketWatch) -- Some 24,000 employees at Gulf of Mexico oil refineries worked under a contract extension Monday, as negotiations between the crude majors and the United Steelworkers union continue in the face of a possible strike.

Lynne Baker, spokeswoman for United Steelworkers, said Monday morning that there's no threat of a strike for at least 24 hours.

"Both sides have been talking," Baker said. "They are making some progress."

Oil major Royal Dutch Shell holds the position of lead negotiator for the contracts that expired Feb. 1, covering 86 plants that represent about 64% of U.S. refining capacity.
The talks cover the 24,000 workers whose contracts expired Sunday; an additional 6,000 employees would also be affected if a strike is called, Baker said.

Exxon Mobil, Valero, BP and ConocoPhillips also operate facilities covered by the union.

The union negotiations center on health care and safety language in the wake of the 2005 fire at a BP plant that killed 15 and injured 140, Baker said.

Keene Little : 2/2/2009 2:07:55 PM

The bounce pattern, with the deeper pullback (especially on the DOW) sets up a potential strong rally leg up so stay aware of that possibility if thinking (or trading) short here. We could see SPX spring back to life and head for 845 by mid day tomorrow. But if SPX drops much below 815 then the short-term bullish scenario starts to look less likely.

Jeff Bailey : 2/2/2009 2:05:59 PM

UNH-NT $0.75 x $0.90 ... VIX.X 46.70

Jeff Bailey : 2/2/2009 2:05:37 PM

UHN $29.16 +2.92% ... ditto.

Jane Fox : 2/2/2009 2:05:29 PM

WASHINGTON (MarketWatch) - The credit squeeze on the economy worsened in the past three months, the Federal Reserve reported Monday, with U.S. and foreign banks continuing to make it more difficult for U.S. businesses and consumers to borrow money. At the same time, most banks reported weaker demand for most types of credit as economy slumped. The few banks that did see more demand for commercial loans said their customers were being shut off from other forms of credit. No banks made it easier for consumers to obtain credit, and only a few made small changes in standards for business loans to make them more available, the Fed reported in its quarterly Senior Loan Officer Survey of 53 domestic banks and 23 branches of foreign banks.

Jeff Bailey : 2/2/2009 2:05:19 PM

OK ... HMO.X 1038.48 +3.15% ... still holding its WKLY Pivot (RSD).

Jeff Bailey : 2/2/2009 2:04:31 PM

2 cents ... sometimes, that's all it takes to stay on the RightSide of a trade.

Keene Little : 2/2/2009 2:03:47 PM

Two equal legs down from today's mid-day high is at SPX 816.56.

Jeff Bailey : 2/2/2009 2:03:21 PM

SMH $17.16 ... session high still $17.40.

Jeff Bailey : 2/2/2009 2:02:40 PM

GE $11.57 -4.69% ....

Jeff Bailey : 2/2/2009 2:02:00 PM

Analysis: Institutional computers nowhere near set to buy the pullback.

Jeff Bailey : 2/2/2009 2:01:15 PM

YM 7,838 .... sliced right through DAILY S1.

Jeff Bailey : 2/2/2009 1:56:35 PM

OEX 390.37 -0.23%

SPX 822.35 -0.42% ...

Jeff Bailey : 2/2/2009 1:54:38 PM

Fascinating ...

VIX.X 46.38 +3.43%

VXO.X 44.64 -2.63%

Keene Little : 2/2/2009 1:49:01 PM

After holding at 830 (two equal legs up) SPX has pulled back and might be finished but I'm thinking it will pull back a little further (bounce and then drop a little lower). I'd like to see it drop back down to this morning's pullback low (817.76) before starting the next rally leg to take us into tomorrow. But corrections are very difficult to figure out real time so just expect it to be choppy.

Jeff Bailey : 2/2/2009 1:38:17 PM

NQ probably the better index to be trading from the bull side today to be honest.

I only trade YM signals here in the MM.

Jeff Bailey : 2/2/2009 1:32:22 PM

See earlier comments/ pivot (RSD) notes.

Jeff Bailey : 2/2/2009 1:31:53 PM

GE $11.60 -4.36% ...

Jeff Bailey : 2/2/2009 1:31:04 PM

Will be looking LONG the YM on this pullback, but want to see a TRADE at DAILY S1 (RSD).

SPX has tagged the 830 level where the bounce off this morning's low now has two equal legs up. If it continues higher from here we've got a more bullish bounce in progress (duh). If it starts back down and creates a very choppy pullback then we'll have a good idea than another rally leg will follow.

Jeff Bailey : 2/2/2009 12:45:17 PM

LQD $99.28 -0.51% ...

Jeff Bailey : 2/2/2009 12:44:56 PM

HYG $73.19 -2.72% ... benchmarking only.

Jeff Bailey : 2/2/2009 12:44:18 PM

PHF $4.67 +0.21% ...

Jeff Bailey : 2/2/2009 12:43:38 PM

SPX 829.06 +0.38% ...

Jeff Bailey : 2/2/2009 12:43:25 PM

13-week Yield Alert! 0.25% ...

Jeff Bailey : 2/2/2009 12:38:08 PM

SPX 827.23

RUT.X 445.82

Jeff Bailey : 2/2/2009 12:37:53 PM

BIX.X 87.34 ... WKLY Pivot RSD

Jeff Bailey : 2/2/2009 12:31:47 PM

Pivot Calculator for those needing RSD pivots for equity futures at this Link

Jeff Bailey : 2/2/2009 12:29:46 PM

Wells Fargo (WFC) $19.17 +1.42% ... DAILY Pivot $19.04.

Jeff Bailey : 2/2/2009 12:28:44 PM

IF assuming a wave bounce, I would want to see BIX.X above DAILY Pivot RSD (88.09) at a MINIMUM.

Jane Fox : 2/2/2009 12:28:24 PM

WASHINGTON (MarketWatch) -- The Senate begins debate on President Barack Obama's massive economic recovery package on Monday, as Democratic lawmakers scramble to get the bill to the president's desk by mid-month and the White House continues its drive to woo Republicans.

Obama is aiming to pick up more Republican support in the Senate following last week's passage of the bill in the House, where not a single GOP member voted for the $819 billion package of spending and tax cuts. A final vote in the Senate is expected later this week.

Jeff Bailey : 2/2/2009 12:27:52 PM

BIX.X 86.76 -0.34% ... smack on QUARTERLY 19.1% RSD.

Jeff Bailey : 2/2/2009 12:25:15 PM

NYSE +0.69% ...

COMPX +0.74% ...

Keene Little : 2/2/2009 12:24:44 PM

SPX is marginally breaking its downtrend line from last Wednesday, currently a little lower now near 822. It broke the downtrend line 20 minutes ago, pulled back slightly and is trying to rally again but it might pull back a little more before continuing higher. So far the bounce remains constructive for higher highs (but again, expect it to be choppy).

Jeff Bailey : 2/2/2009 12:24:23 PM

On 01/29/09 I thought it best to close out the NAKED QAV-NZ after seeing the NASDAQ Comp. NH/NL tabulations as on 1/28/09 I was monitoring the DAILY Ratio (11.5%) nearing what would be a 3-box reversal higher (12.0%) for the 5-day NH/NL ratio.

Early reads on 01/29 had me assessing RISK of NAKED, vs. Gain of 61.11% and moving to the sidelines.

I'm going to assume for now that we'll get an a-b-c bounce off this morning's low (and watching SPX 830 for potential resistance for the 3-wave bounce) and that will create a larger degree wave-A. Then we'll be due a corrective pullback (wave B) to be followed by another rally leg (wave C). So the potential is for a very choppy day.

Jeff Bailey : 2/2/2009 12:08:41 PM

COMPX 1,487.65 +0.76% ...

Jeff Bailey : 2/2/2009 12:08:19 PM

NASDAQ NH/NL match Friday's closing tally.

Keene Little : 2/2/2009 12:06:33 PM

We're obviously getting the next leg up. Two equal legs up from this morning's low is at SPX 829.81 so if we're to see a corrective climb off the low that level should act as resistance.

For you pivot traders out there, or that are trying to learn their importance, also begin to think about other indicators such as TRIN, TRINQ, VIX, VXN, VXO and their hours of measure as to why institutional computers would use Regular Session Derived (RSD) for pivot level calculation.

Keene, I saw your 10:53 post, and I do have one idea. Although I do not trade VIX options and so didn't follow the trade, the VIX options are odd. They trade, not on spot VIX price, but based on VIX futures. To quote the CBOE, the "underlying for VIX options is the expected, or forward, value of VIX at expiration, rather than the current, or 'spot' VIX value." My November 21 Options 101 article describes this, explaining why VIX options sometimes move in ways that don't seem in concert with the movement in the VIX. Readers can find it easily in the archives. Perhaps that was a factor, too. This is a link to the CBOE's website that explains further and also provides some examples: Link
.

Keene Little : 2/2/2009 10:53:30 AM

Keene I got in on your VIX theory [where I stated last week we will probably see a bullish resolution out of the VIX]. I'm a little confused. I got in a March call at 4.70 when VIX was at 43. Today the VIX is over 49 and that call is only up a buck. How is that possible?

Welcome to option premium inflation and deflation. Linda is our resident geek, I mean greek (wink) expert and she could probably explain option premium much better than I. Perhaps Jane and Jeff have some ideas as well. Often times when market makers sense a market turn is coming they'll inflate the premiums so as to reduce their risk (not yours) when they have to take the other side of the trade (when you buy a call they have to sell it).

I remember taking an option class one time and the instructor spent time in the trading pits. When a setup was coming where the market makers expected a lot of call buyers to come in they'd inflate the premiums (theoretically to compensate for higher risk) and then after the call buyers rushed in to do their buying the market makers would then say "this is where we crush the call buyers" and they'd simply press a button to deflate option premium and thereby protect their side of the trade.

Did the same thing happen for the VIX calls or is there something else at play? I don't know but it's one reason why I've become reluctant to buy calls anymore (except on the way down just before I'm looking for a reversal--when put premium is inflated and call premium is deflated). I much prefer to be a seller of premium (with all of its inherent risks).

Jeff Bailey : 2/2/2009 10:53:25 AM

In this weekend's MM I posted chart montage of VIX.X and SPX with QCharts' RSD daily and weekly pivots and Monday-Friday trade.

SPX 822.53 -0.40% ... session high so far has been MONTHLY 38.2% (RSD). Low has been DAILY S1 (RSD)

Jeff Bailey : 2/2/2009 10:42:16 AM

NDX.X 1,191.32 +0.93% ... back to test DAILY Pivot (RSD).

Keene Little : 2/2/2009 10:32:33 AM

This SPX 15-min chart shows the Fib price retracement levels and time projections that I'll be watching for the expected bounce: Link

Jane Fox : 2/2/2009 10:26:15 AM

WASHINGTON (MarketWatch) - The nation's manufacturing sector contracted again in January, but at a less rapid pace than the prior two months, the Institute for Supply Management reported Monday. The ISM manufacturing index inched higher to 35.6% in January from 32.9% in December. The rise was unexpected. The consensus forecast of estimates collected by Marketwatch was for the index to slip only a bit to 32.8%. The January index is the highest since November. Readings below 50 indicate contraction. The ISM index has been below 50 since January.

Keene Little : 2/2/2009 10:25:36 AM

A downtrend line from Friday's mid-day high is currently near SPX 825 so a break of that would be another good indicator that the bottom is in for the leg down from last Wednesday. A typical retracement would now be back to about 845 (50% retracement) by mid day tomorrow (62% of the time for the leg down from last week).

I still do not have charts because I am moving money from account to another. Sometimes life can just bite you in the butt and doesn?t let go. Sigh!!!

In any case, I know I was looking for a higher low and if the SPX closes below 800 we will not see a higher low but a lower low and the bears once again have control. Right now the bulls and bears are battling and this battle is very very hard on investors nerves.

Not the ESD WKLY Pivot as it would not be in sinc with NDX/QQQQ so no help in assessing upside.

Keene Little : 2/2/2009 10:15:05 AM

NDX is leading the way back up this morning and has now overlapped its 1184.90 low at 1:40 PM Friday. That should be signalling the decline has finished (the same level for SPX is 827.48 so it's got a little more work to do). The quick jab down this morning may in fact have been all we're going to see for the downside. If true we should start a larger bounce that takes us into tomorrow (but stay aware that SPX could drop back down for at least a test if not a minor new low this morning).

Keene Little : 2/2/2009 9:59:41 AM

The very short-term pattern for the drop from Friday's mid-day high supports the idea that we'll see a relatively brief consolidation near the low this morning (perhaps until about 10:30 AM) followed by another new low. If we are nearing the bottom of the leg down from last week's high SPX should find support between 805-810. If SPX 800 breaks it could get downright ugly.

I still do not have charts but I do remember SPX needs to hold 800 and if the bulls let that support break then the next level of support could be November lows. I will check for sure once I get charts back.

Jane Fox : 2/2/2009 9:48:46 AM

The probability that February will be a negative month is growing and we may have to break November lows before we see any kind of buying.

Jeff Bailey : 2/2/2009 9:47:47 AM

Case closed. (wink)

Keene Little : 2/2/2009 9:47:27 AM

Drop it Jeff.

Jeff Bailey : 2/2/2009 9:46:31 AM

Keene ... Can you give me the Pices of DIA, SPY and QQQQ last night at 11:00 PM ET?

Jane Fox : 2/2/2009 9:45:53 AM

Although I believe 2009 will be a bullish year I have to consider the data in front of me. According to the Stock Traders Almanac, all negative Januarys since 1950 were followed by a new or continuing bear market or a flat year. This is rather sobering I must say. On the bright side though, many of these subsequent declines were small and 11 of the 22 down Januarys since 1950 were followed by February-December gains and nine full-year gains.

So we are off to a bad start this year for sure.

Keene Little : 2/2/2009 9:42:45 AM

Jeff says futures pivots should be based on RTH (regular trading hours). That's his opinion and yet he states it as fact (2:24 AM). Many argue that since futures are trading all-hours (international traders) that their highs and lows should be included. I've seen enough differences between the futures and cash price patterns to know they do in fact trade a little differently. And when you take your pivots off the daily and weekly charts they include all-hours prices. Therefore I will continue to use all-hours pricing in my futures pivot tables.

Jane Fox : 2/2/2009 9:40:22 AM

We await the ISM Manufacturing report out at 10:00ET today.

Jane Fox : 2/2/2009 9:25:05 AM

I apologize but I have no charts this morning. I am working on it and will post the overnight charts as soon as I get this straightened out.

Keene Little : 2/2/2009 9:21:23 AM

Well, it looks like we've got more than a little drop to start the day--doesn't exactly look like SPX 820 is going to act as support. But ES is trying to find support at its uptrend line from November through the January 20th low (and the 21st and 23rd), currently at 810. That same trend line for SPX is closer to 818 so we'll see if a quick stab lower hits some stops and reverses back up (or not).

Jane Fox : 2/2/2009 9:13:44 AM

The SPX is coming off its weakest January on record falling 8.57% for the month. The previous record was a 7.04% drop in January 1970. Needless to say this has investors quite nervous.

Jane Fox : 2/2/2009 9:00:41 AM

WASHINGTON (MarketWatch) -- U.S. real consumer spending fell in December for the sixth time in seven months as consumers opted to save money what they gained from falling energy prices, the Commerce Department reported Monday.

Nominal spending fell 1% in December, marking the sixth straight decline. This was in line with expectations of economists surveyed by MarketWatch.

After adjusting for a 0.5% decline in prices, real consumer spending fell 0.5% in December, a reversal following a 0.3% increase in November, the government said. It was the sixth decline in real spending in the past seven months

Jeff Bailey : 2/2/2009 3:12:09 AM

YM off 65 at 7,890. Low so far 7,864. High was 7,976

Jeff Bailey : 2/2/2009 2:25:37 AM

YM off 85 at 7,870

Jeff Bailey : 2/2/2009 2:25:32 AM

YM extended session low so far 7,865.

UNH-NT traders ... will check YM and ES futures in the morning. If they've hit their RSD Daily S1s overnight (ES=804) , and cash open is back near the DAILY Pivot, be ready.

It appears that Keene is still trying to use extended session futures highs and lows. His would be (ESD) Extended Session Derived.

As I've tried to teach you, and SHOWN you how even in an extended the Regular Session Derived are the levels that are traded (because futures are used to HEDGE CASH session and ~98% of share volume traded), I will continue to warn against using the All Session Derived if tracking institutional computer trade.

All session derived trade Sunday-Friday for currencies are useful, when trading currencies themselves, or in combination with/against each other.

Jeff Bailey : 2/2/2009 2:23:52 AM

Fair Value for the INDU is -47.61 on Monday.

Jeff Bailey : 2/2/2009 2:23:39 AM

YM traded a Regular Session high of 8,359 on Wednesday (WKLY R2= 8,350).

I thought we'd get a bounce earlier on Friday but no bounce. As of the end of the day Friday it looked to me like we should be very close to the next level for a bounce--near SPX 820. I mentioned late Friday that I liked the possibility for a quick drop lower Monday morning and then start a bigger bounce into Tuesday (to correct the leg down from last Wednesday's high). This is shown on the SPX 120-min chart: Link

A typical retracement could have SPX back up to about 850 before it's ready to resume the selling and it should be a very good opportunity for the next shorting opportunity. I don't know yet whether SPX will drop to the November low and bounce back up into the end of February (shown in dark red) or continue lower (below 700) into the end of February/early March (pink wave count). Based on some things I studied over the weekend I'm starting to lean more towards the more bearish pink wave count. These are both shown on the daily chart: Link

The good news about the pink wave count? We could get a bottom a little sooner and get on with a market recovery this year.

OI Technical Staff : 2/1/2009 9:59:59 PM

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